tv Bloomberg Markets Americas Bloomberg September 5, 2017 2:00pm-3:30pm EDT
scarlet: we live in bloomberg world headquarters in new york. here the top stories we are covering from around the world on the bloomberg. stocks a major indexes in the red right now, by better than 1%. off a little, with the dow falling more than 200 points. treasuries rallied the most in months as tensions with north korea amount and another atlantic hurricane threatens to make landfall. in politics, the trump administration has officially leavingdaca, immigrants in limbo. google, and jpmorgan coming against that decision. steve cohen seems to be urging ever closer to launching a hedge fund. we have more on this bloomberg's move -- bloomberg's group just
ahead. abigail, a sea of red right now. day, sharpbearish declines for the dow, s&p, 500, this selloff has been pretty sharp and swift today. we have the small-cap index down about 1%. the russell 2000 higher earlier today. doing a bit of a bearish reversal as tensions with north korea escalate, as scarlet was mentioning, uncertainty around d.c. lots for investors to contend with today. the major averages on pace with her worst day since the middle of august. no one point, the dow had been on pace for his worst day since the middle of may and that is true for the 10 year yield. the 10 year yield drops, that tells us even bonds are rallying, down nine aces and. -- nine basis points. point, the 10 year yield
had its biggest drop since june of last year. could affect the fed. either way, this is affecting the financial markets and the fact that financials, that the worst to sector on the day. s&p 500 financial sector down about 2%. these are bigger movers within that sector. lots of red here and the sectors having its worst day since the middle of may. the main reason to think this could continue. take a look at the technicals of the 10 year yield. this is g #btv 3866. after the election, there was a big backup can kneel. in this range between 2.3% and 2.65%. range,aking below that suggesting the 10 year yield will hit 2% and very interesting, we have seen a round-trip since the election,
the 10 year yield is at its lowest level since november 9 of last year. lots going on here. the rally we are seeing for bonds confirmed by other haven , and the vixen trading higher. higherr index shooting by 30%. it's a risk off day, investors going towards haven assets. out with aed second-worst sector of the day, some of the worst technology performers today, apple, amazon, qualcomm, and nvidia. the chip stocks taking a very hard. philadelphia semiconductor index down about 1.8%. these are the high beta names. paul sweeney, director of north american researcher at bloomberg says these names tend to selloff more on risk off days. we are having that kind of day and we are seeing it here for technology. julia: president donald trump is defending his decision to phase out obama era program protecting young immigrants from deportation. the statement issued by the white house, trump says i do not
favor punishing children, most of whom are now adults for the actions of their parents. we must also recognize we are a nation of opportunity, because we are a nation of laws. trump goes on to say he will delay the end of the daca to givefor six months congress a window of opportunity to act. companies from a broad range of industries, including technology, and finance condemning the trump administration's decision. for. get to seleka talkeds been widely about. just given what we have seen in the past of immigration and try to pass legislation, how likely is it that congress can do something in the six-month window? >> it's a great question. it is important to know this is likely to immediately fall to the bottom or near the bottom of congress is to do list. ,hey have very packed fall
starting with the need to fund the government to extend programs like health insurance and flood insurance. raise the debt limit, they have to do a lot of things very soon. they have hurricane harvey disaster relief to get off their plate with another storm coming that might potentially at florida this weekend. don't expect action in the near future. , it's upnext six month to republican leaders view this historically over the last couple of decades. it comes to legal status or legalization, they have aired on the side of interaction or opposition. ofir bases not only favor action. it's unlikely, as far as i can see how that's going to happen. scarlet: what happens if congress does nothing? if they never got around to even addressing and by the end of the six months? >> according to the trump administration, it will wind down in six months. they will allow existing permits to continue over six months.
it sounds like they will allow some of the docket beneficiaries, about 800,000 in total to regular application that they expire within the six-month window. that, they will unwind it. the guides is not 100% clear. it, are not able to renew it's important to remember these are about 800,000 people all of them brought to the country illegally by their parents as minors. they all attended or graduate from school, some of them served in the military. they also begin to show the vast majority have jobs. is one of the more sympathetic groups of people, in terms of public polling, who americans believe deserve sympathy. julia: the framing of this was always going to be important, the legality of the issue we got from jeff sessions. if this ploy fails in congress don't manage to pass something, what damage do you think will be to the gop and president trump
because of this? it was a play, again, to the base. issuean interesting wedge that unites the democrats and opposition to this movement. we've seen another members -- a number of members, including john mccain and orrin hatch, chairman of the senate finance committee, who objected to president trump's move. these -- itower does empower the nativist faction in the republican party that our his eventual -- that victory.is eventual they would lose their work permits and protections and be subject to deportation, potentially being sent to a country they don't even remember. scarlet: business has come out against this decision by president trump to let daca expire. mark zuckerberg wrote the not justto end daca is
wrong, it's cruel to offer young people the american dream, encourage them to come out of the shadows and trust our government, and then punish them for it. what is this as the business is going to be lobbying congress to take this up as an urgent matter? collects the sense in the business community is certainly in favor of dhaka and of -- of and opposed to the president's move. microsoft says they have a number of employees who are daca beneficiaries and they want to have them be protected. if it decides to really make a fuss and have a huge impact, it could make life difficult for president, potentially even causing him to reverse the decision read he's got six months to do that, and it could take a heavy push. president trump, once he's made likes mind, on a thing this which place to his base and undoes action by president obama , it's going to be hard to dislodge that. julia: the executive order to extend the program, a measure he
could stand that. scarlet: let's check on bloomberg first word news with taylor riggs. taylor: hurricane irma has picked up steam as it approaches the caribbean all caps to the u.s.. florida is bracing for potential landfall. residents plan to board up their homes. category five storm with sustained wind at 175 miles per hour. a hurricane warning has been issued for a number of islands, including puerto rico, st. martin's, and the u.s. and british virgin islands. are coming back online following hurricane harvey. she will valero's refineries and taxes are back to free storm refining rates and exxon mobil has resumed shipping fuel. point,store -- at one the storm shut down 90% of u.s. refining capacity. theresa may will try to force theresa may will try to force
the pace of brexit negotiations. later this month, she will deliver a speech to make the case for continuous talks. the u.k. wants to move on to the issue of trade, while the eu wants to settle other key issues first, such as how much the u.k. will pay an exit fee. there are growing doubts that a deal on rewriting the north american free trade agreement can be reached this year. according to officials familiar with the negotiations, the latest round of talks in mexico city is coming to an end without any major breakthroughs. president has threatened to pull the u.s. out of the agreement. global news, 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. i'm taylor riggs. this is bloomberg. scarlet: coming up, count down to december 12. apple investors won't have to wait much longer to see what the tech giant has in store. we weigh the risks and rewards of buying apple with larry henry -- larry haverty. sarah huckabee sanders taking questions at the press briefing.
julia: this is "bloomberg markets," i'm julia chatterley. scarlet: lance earl of food. in one week, apple is scheduled to announce new iphone models at his -- at the launch event. apple shares up 40% year-to-date versus the s&p 500 9% advance. is apple do for a correction? larry haverty joins us now from miami. i know you consider apple to be a buy, although you season downside risk for the stock.
what's critical here is china. ?hy china in particular is a large: china economy and the chinese have a very vibrant and growing middle class. to give you an idea of the power plan ise budget in the for $700 million -- 700 million outbound chinese tourists. just imagine all of them with apple iphones snapping pictures, which they love to do. imagine them without iphones snapping pictures, which they love to do. there's a big difference between one and two. if our government, for example, can't make peace with china and china decides to respond against apple, it will be very difficult for apple to hit the forecasts. i think that is a minor risk. the chinese consumers are very,
very brand centric. the economy from the consumer standpoint is terrific. we watch the calgary closely. 20%, is run close to phenomenal numbers. i'm optimistic, but with kim jong-un rattling the sabres, no one can know with certainty what's going to happen. i think that's the principle risk. julia: i want to ask about the new iphone launches and price sensitivity. analysts that barclays were saying perhaps apple could bundle some services into the iphone that you buy for around $1000, just to reduce the price. survey saying 18% of the people who responded would be willing to buy at $1000. if they reduce that $800, those numbers doubled in terms of those willing to purchase it. can you imagine them doing something like that? bundling services like icloud or
apple music? could,erty: i think they but i'm going to give you another wrinkled i'm very sure is going to happen. if you look at the iphone, it's just another consumer durable, like a washing machine or dishwasher. one of the things about consumer durables is they are financed. in a lot of these apple phones are going to be brought -- bought on lease from places like best buy and verizon wireless and at&t wireless. we got very, very low interest rates right now. i think the companies particularly the telephone companies, are going to be very aggressive on financing terms for the new iphones, so they can keep the customer within their sphere of influence. really, the key here is a lifetime value of the iphone customer. that is a big number. you don't want a lot of turning your system and all of these companies are going to do everything they can to keep the
consumer there. i think at the end of the day, the price may be high tackle, but other people are going to subsidize it. i think the low interest rates are a very, very strong positive for the stock. julia: why should amazon give up their margin to the likes of verizon and best buy to narrow irs? do you think those who analyze apple factor this into their valuations of when they are assessing apple at this stage? this is vitally important. mr. haverty: i think that is the great inefficiency, where i have been able to make a living for a number of years. the people who follow this company are largely tech analysts. they don't understand thing like financing it creates a gaping inefficiency. i think five or 10 years ago, what was missed was the
development of the apple store. the apple store is probably the premier retailing vehicle in the country. if you could get the margins from the apple store, think it would be better than any of the traded retailer. apple sells at a lower price than most retailers, and most retailers are in the investors' doghouse. investors and appreciate the idea of the apple store and i don't think they appreciate the fact that this is a consumer durable. people who are partners of apple are going to make it happen. think -- you could drive a truck through the inefficiency. scarlet: larry, i wanted ask you about something apple is doing, which is selling bonds to finance latest round of share buybacks, planning to offer the debt in as many as five parts. ownsw you or the firm 493,000 shares.
you do not own apple shares personally. how does the selling of these apple bonds factor into looking at the company as an investment? is this something that helps the case? mr. haverty: i think it does, and it's funny, it just indicates gaping inefficiency in the market. any company does two things -- it operates its business and it finances its business. if you take the pretax interest cost of these bonds that are going to be interest -- issued and tax adjusted, it's less than the dividend than apple pay's on the stock. essentially, apple is selling bonds at below zero finance cost. they are basically using finance as an offense of weapon. the operating executives at apple had a lot of fun and now it's time for the finance executives to have a lot of fun. the only thing they should be doing is doing this every week. i just think it's in the shareholders interest, and it's
brilliant finance. although it doesn't move the needle as much as making a great phone. my applaud to the finest apartment at apple. haverty, portfolio management at gavin investors. scarlet: all the major indexes down by 1%. the s&p 500 just below 1%. imap on theat the bloomberg, looking at the different sectors and how they are performing, out of the 11 sectors, only two of them are higher -- energy up by .3% and will prices gain for a third day. utilities low when the big losers on the day are financials i better than 2%. -- off by better than 2%. from new york, this is bloomberg. ♪
markets," i'm scarlet fu. julia: i'm julia chatterley. u.s. stocks selling out today, and one point the dow was down more than 278 points. they are bouncing off the lows, but the flight to safety is evidence. let's get color from michael. great to have you on the show. we were just saying camera, it's interesting to not see the dollar rally in this instance. you want to see the u.s. as a place where a lot of the risks are. the market was very sanguine and optimistic about this debt ceiling issue doing resolved in time. today, i think maybe there is a little jitters about that coming back. week at at the one 4.3%, the highest for the auction since 2008. in his relentless flattening of the yield curves. julia: we have been asking the
question about financials -- why, even with the expectation of some kind of deregulation, are the financials so resilient in the face of the flattening yield curve? michael: exactly, they are taking that point, and among 24 industry groups, ranks are leading the decline on those yield curves. i think the decision today from the administration to end the daca program is probably things a little bit. it's turning up the temperature on partisan rancor when they were hoping to go the other way and hoping congress finds common ground to solve these issues they need to solve the next month. that has brought a little bit of a curveball. that auction shows how much angst there is an people worrying about it. and the financials group insurers are really getting clobbered today. hurricane irma is off the charts and i think there's a sense that the market could survive another large hurricane, but with
another one coming right after it -- it's a hard situation. scarlet: i wanted to ask about the federal reserve. it feels like more and more people are saying that this could be a risk going forward. for a while it was the fed is not going to do anything, it's copacetic. michael: it's tough to say with storms coming in possible legal turmoil coming up, whether that will cause the fed to take a second look. i'm sure no one is expecting a hike this month. how far they will telegraph they are pushing back the next hike will be a good question. julia: we had fed speak this week. scarlet: and plenty of fed speakers this week. how much north korea's popping up in the notes you look at? it's front of most people's mind today. president trump's tweet earlier saying he is willing to sell japan and south korea more weapons, really keeping it front and center stage. it is really a gauntlet of
issues just try to get there today. a little from column a, a little from column b that has people risk off today. julia: investors wishing they had extended the weekend. market -- michael regan. coming up, the commodity close. scarlet: gasoline prices as houston recovers from harvey. investors are keeping a close eye on hurricane irma and how big an impact the category five storm is having on markets, specifically soft commodities. from new york, this is bloomberg. ♪
gasoline futures are dropping for a second day, off by 2.7%. prices sliding to their lowest level since harvey slammed the texas coast more than a week ago. key refineries and pipelines are starting to come tech online. oil is extending gains, higher for third straight day, up to four point 4% over the past five days. best level in more than three weeks, and traders are watching hurricane irma, category five storm that has the potential to have the gulf of mexico. irma is sending orange juice futures higher, up by more than 6% as the storm is on course to hit florida later this week. julia: thanks so much. the effects of hurricane harvey still being felt in houston. bloomberg's ryan collins joins us with our bureau there with a look at how the industry is recovering. the refiners are desperately trying to get back to work. what percent capacity of u.s. refiners are still halted at
this moment, and do we have any sense of when they could come back online totally? ryan: at the height of the storm, we saw about one-quarter of refining capacity off-line, and that is now at about 13%. goldman is actually estimating that about 2 million barrels a day of capacity will remain off-line until thursday, down from the peak of about 4.6 million barrels. they also estimate that about 1.4 million could remain off-line through mid-september. julia: if we look at what happened in the market, definitely futures, hitting a 26-month high last week, do you think the market is pricing in muchuch up doesn't -- too optimism here? the: hard to say that market will move how the market will move to do have to understand that the gasoline futures were fluctuating around
$169 today, the lowest since harvey hit. wti definitely hit a six-week high intraday today, the highest assigned at5, refining capacity is coming back online, especially in places like corpus christi. timelinewhat is the for the remaining capacity to come online? we are not back to normal yet. what are you hearing? ryan: goldman is estimating that about 1.4 million barrels a day could remain off-line through mid-september, but the majority will be coming back online by about thursday. that has to do with the corpus christi refineries coming back into the system. scarlet: ryan collins in houston, thank you. we want to take you to the streets of houston. the houston ship channel is the busiest shipping corridor in the country, and it was closed to incoming and outgoing traffic
for almost a week, causing a backlog of ships. if you look inside the bloomberg, g #btv 5453, you can see the ships waiting to get in. the ones that appear to be on land over here are in local rivers i know. our bloomberg reporter is standing along the river right now and joins us. give us a sense of what you are seeing, the scope of the movement there. >> yeah, we are seeing a lot of ships already moving to the passageway. we just saw a very large gas carrier coming through. the backlog has really been worked through. there are probably 12 ships out there waiting to come in, and we have already seen some export ships leaving the channel, meaning they got in and loaded and are already back out in the open seas. julia: we heard this morning that u.s. exports literally collapsed last week relative to the prior week.
can you talk about some of those numbers for us? when do we expect everything to return back to normal or some sense of normality to be restored given the backlog? it is actually almost back to normal already. we look to the export numbers from last week. obviously, there was literally no exports from this area. when we look at the monthly data later this month, it will have a big impact. as of now, terminals are up and ready to go, and they are loading ships. julia: amazing. what about some of the storage -- is based there believe it is home to the largest area of lpg storage capacity. with 50 inches of rain, i would think it would take weeks to solve contamination issues. do you clarity with the storage capacity there? >> yeah, that is going to take a little bit longer.
we have seen some of those operations coming back. the difference is those products that are stored underground were safe from the flooding, and they are able to use the pipelines to ship them down to this area where there was a lot less damage and less flooding. about five minutes ago, we saw in to loader coming fuels, and those will be going as far away as china, japan to supply chemical plants in the far east. you gotten a chance to talk to anyone on the ground, talk to some of the crew who operate these tankers? i wonder how they are feeling and what they are saying about the situation right now. think people are mostly just happy to be back at work and happy to be safe. i even saw, just driving down here, some construction sites building new tanks. so i think people are really happy to be in recovery mode and done with the storm. scarlet: relief, definitely. and safety.
thank you for joining us from houston. let's check on the headlines on bloomberg first word news. people aredreds of gathering at trump tower in new york to protest the president's decision to end the dreamer protech that has protected children of illegal immigrants from deportation. more than a dozen protesters were arrested for blocking traffic the the protest is said to last into the evening. president trump is losing another white house egg, and insiders say this one could be the most damaging. he is leaving job as director of oval office operations, and he was once president trump's bodyguard and is one of his closest confidants outside his family. the president is said to be crushed by the departure. vladimir putinnt says president trump is "not my bride and i am not his grip." he would not criticize president trump, saying it was naïve to
say he was disappointed with the trump presidency. in the u.k., the opposition labor party will try to amend prime minister theresa may's brexit bill. labour lawmakers want to change classes they give government ministers the power to modify loss with little scrutiny. the bill is designed to help transfer four do gets of european rules and british law. debate begins thursday. global news 24 hours a day, powered by more than 2700 journalists and analysts in more than 120 countries. this is "bloomberg markets." i am taylor riggs. cohn: coming up, steven may be getting ready for a comeback, and we have details on his potential return. scarlet: equities have come back off their lows,k a little bit of a comeback in the last hour and 15 minutes. still looking a pretty broad losses. looking at the sector for
let's look at intraday numbers, down about .5% on the financials select spdr -- sorry, down about pretty big drop here today. insurers are losing and some of the banks are losing, as well. about-year yield down nine basis points, getting close to about 2.1 percent, so lows in the bond market as investors look for safety. that is not boding well for banks stocks. to give you perspective for some of the big financial companies, goldman at the top, down a little bit over 3%. some pretty big losses on one of the sectors we have been watching carefully since the thetion, the better part of last year as banks react to politics and react to the bond market. looking at progressive and a few other insurers. these are basically reacting to news that we are about to get a
double whammy on hurricanes, hurricane irma approaching florida. we selected progressive because we're looking at these insurers and have to figure out not just how the insurers are going to be affected but also reinsurers. that is dragging a lot on the benchmark for financial companies. we have got to figure out what will happen. it is not just about texas now, it is also about what is coming. two of these back to back is not a great situation. scarlet: you wonder about a more disturbing hurricane season than usual. oliver: looking at the timing for this and also the all-around effect when you have two of these big category five storms, a lot of damage will happen. and sure's are able to offload a lot of the risk through reinsurers for these big events, hurricanes, major disasters. the problem for reinsurers if
they take on the risk when these happened back to back. right now, we're looking at potentially worst damage than hurricane katrina in terms of estimates for dollar amounts. another point morgan stanley made is that for some of these areas, prices for the insurers were actually coming down a little bit. longer-term, are they are going -- are they going to keep those prices elevated? it is a positive for the stock. that in the short-term, nothing positive on the forefront. julia: our guest said that people are becoming more focused on the debt ceiling debate and whether or not that filters in. it points to the u.s. dollar down. so even a flight to quality of some sort, the dollar is not in the fitting here. oliver: this is a big thing today. we're looking at the insurers, of course, but it is a big day for the market overall. we see that reflected in consumer financials. here is a list of catalysts today.
hurricane irma, still looking at harvey, north korea's third over the weekend, trump being alienated with daca and the reaction on that. that will weigh on some of these bank stocks, as well. julia: critical points to make. a lot of different moving pieces. thanks. it looks like billionaire investor steve: is it stating stage for a comeback. he's undecided about starting a hedge fund, -- he is undecided about starting a hedge fund. cohen wasremind you, barred for managing as a capital until january 1 of next year after pleading guilty secure -- to securities fraud. tv reporter has been following steven cohen for years. from massachusetts, he has more on this potential comeback. great to have you on the show.
what have you been hearing? i mentioned that january of 2018 is when the ban on managing outside money rolls off. do is spect inflows on january 2 -- do we expect inflows on january 2 weston mark >> we may not like what he is alleged to have done or the settlement reached with the government. we may not think it is fair. but he has paid his "debt to society," and i think it is to be totally expected that he would begin to gear up to manage other people's money now that those restrictions are about to be lifted. it takes several months to put together marketing materials and share potential new investors. he was managing his own money the last few years, which was pretty done good. so this is to be expected in standard operating procedure for a guy in the business of managing other people's money.
scarlet: officially, he is saying he is still undecided about starting a hedge fund. why would he be so shy publicly if he is in the clear? he would be free of restrictions? >> he may not be able to raise the money. he does not want to say i am doing this if people are still nervous about putting their money with somebody named stevie cohen. obviously, he has had a very good track record managing his still has but he reputational risks. it depends whether institutional investors will want to give him their money based on that reputational risk that he still has. so i think he is hedging his bets because he is a hedge fund manager. julia: he as been running this as a private family office for the last 18 months. potential investors, what matters most, the climate, the form of fund were they did so well, some averaging 30% versus
what he has achieved in the last 18 months? the structure of the market appears to have changed. there are new angles here since he was kind of other on his own is a hedge fund manager. >> yes, absolutely true. the whole asset classes not perform particularly well lately. some of the big-name hedge fund managers have fallen on hard times, as well. hen is obviously a big-name hedge fund manager. .72'sot have access to private performance, but for the first year, i heard it is fairly well. he is still making a lot of money for himself. again, i would expect him to be cautious about thinking about raising money from outside investors, but he needs to be successful in doing that, and i'm sure he will find people who are willing to pay what he wants
to pay, which has been at times three and 30, which is very expensive. he has outperformed over a long period of time. the question is, did he do that by getting special information other people did not have? is he still going to rely on that? can he play a closer to the rules that he has in the past and still be successful? a lot of questions, but he has performed well, generally speaking, and i would expect him to be able to raise this money. scarlet: the sec never charged him directly in the investigation.
+++ do you think steven cohen will have trouble attracting season portfolio managers or young talent as a result? likes i do not. i think top hedge fund managers, if they are not going on their own, they would love to have a chance to work with somebody like stevie cohen. people have short memories, scarlet, as i think you know. yes, mr. martoma was to his appeal and will stay in jail or wherever he is. so that is kind of a one-off, and people can hope that stevie cohen learned from his mistakes. as you point out, he avoided
being charged for whatever reason. whether he has learned his lesson, i don't know. but one hopes that he has and is trying to perform better, without that kind of special sauce that he used to get that made his performance outstanding. maybe he has shown that he can do it without that. we will have to see. people are strange. julia: why do you think he wants to come back? financially he doesn't, does he? >> he is proving a point, absolutely. he is proving a point that he got by the government investigation, beat the wrath, and now he's back and can invest again, other people's money, and he is going to do that and show the world that he does not get is thatial information, that he was doing it in a legitimate way. lot sure he feels he is a to prove. it goes back to the old adage, why do corbyn's sting -- why do scorpions sting? because that is what they do. these people invest other people's money? that is what they do. that is what stevie cohan does. he has a lifestyle that he likes very much and wants to maintain and build upon. it, he wantss face to go out on top, right? >> exactly. scarlet: bill cohan joining us through skype, thank you.
julia: this is "bloomberg markets." i am julia chatterley. scarlet: i am scarlet fu. united technologies is buying rockwell collins for about $23 billion, and this will bring jet engines and such screen cockpit displays made by rockwell collins under one roof. a key question, will this put pressure on boeing and airbus? ws hammond from bloomberg ne is joining us.
why does this deal makes sense for them? >> because you have a very consolidated customer base. you mentioned airbus and boeing, quite possibly the biggest commercial ones. big and this very consolidated custom base that can exert a lot of control over the supply chain in terms of pricing pressure and changing aspects of that. you are seeing a fairly fragmented supply chain coming together to give it self some more control. the other thing you would think rates logic is united technologies has a big aerospace business already. rockwell, as for them, there are elements that they do not do that are more in line with technology. worth noting that rockwell just consummated a deal to buy a nother aerospace company. so it is almost a merger within a merger within a merger. julia: it was interesting to see
boeing come in straightaway today saying they were cautious. does it give more power to push back against boeing. does it give them more ledgers -- leverage? >> it does. airbus was a bit more singling. -- airbus was a bit more sanguine. they politely said something like doma's this up. -- like don't mess this up. my colleague made a good point this morning, which was that if during this merger integration they sort of mak mistakes -- make mistakes and there are delays, that will give customers more control. it will be interesting to see how it plays out. the question is what boeing can do. julia: and? >> we don't know.
they could maybe go to regulators and say this is anti-competitive. they can look as hard as they like, but whether or not they can action anything is a different question. julia: if we are talking about consolidation, particularly for parts manufacturing, talk about the hurdles. >> the real argument would be that you have now this is a big all under one more liar that would have too much control in terms of what it could charge to the customer base. scarlet: ed hammond, thank you for that update. coming up, as the september trading myths kicks off, we will find -- as the september trading month kicks off, we will find out more about the markets with our guest. ♪
bloombergare live in world headquarters in new york. here are the top stories we're covering. is september going to be the month that shatters a relatively stock market? there are risks from central banks to geopolitical events. what could be the two big point for equities? plan, and the treasury secretary is talking about the impact on the economy. after months of games in big cap tech stocks, saturation is growing on when the tech bubble will burst. is it time to start sounding the alarm? let's check on markets with abigail doolittle. we're still down. abigail: we have bounced off the lows come a but we're looking at pretty decent declines for the major averages.
dow, as a be, and as they call sharply lower. at one point, all three had been down more than 1%. now all three major averages to on pace for the worst day since the middle of august, august 17, this on uncertainty in d.c. and rising geopolitical tensions, especially with north korea. aet's look at g #btv 1702, multiweek chart of the dow. here is the selloff we are seeing today on those geopolitical tensions with north korea. koreahe weekend, north claimed they set off a hydrogen bomb. the u.s. has said we should raise sanctions. then north korea said they could respond "in their own way," so we see another leg lower. this was the worst a day since august 17. this day was also provoked by tensions between the u.s. and north korea, finishing a session lows. we seem to be bottoming off of those lows. we will see that holds.
last week when we saw north korea send a bomb over japan, initially risk off and then a reversal. we are perhaps trading off of the lows today. we will see how we close spirit a lot of that selling on august 17 came right at the end. some haven assets trading higher as investors are fleeing stocks and going into bonds and gold. the vix of about 30%. aboutove and yields down 10 basis points, the biggest move since the middle of may. this is influencing stock market action from the standpoint of the banks. we will be looking at a few of those in a moment. first, here is a chart that shows one area of the treasury market that is doing not so well. g #btv 6272. this has to do with the debt ceiling. in blue is the two-year yield. in white, a four-week bill that
was just auctioned off. you see it yielding more than the two-year yield. investors looking at that possibly being a risk off event. a few movers related to the banks. rallyingyields are today, and that is dragging on the banks. when yields drop, it is thought to be a headwind for lending activity of banks. irma, overall, could be another pressure on stocks today. but look at home depot and walmart, both getting a bid, similar to what happened with hurricane harvey. overall, a bearish day for the financial markets in the u.s. julia: thanks so much. former president barack obama is speaking up against president donald trump's decision to end daca. he says it is about basic decency, whether we are people that keep hopeful strivers at of
america, and how we treat our own kids. it is about who we are as people and who we want to be. he says the white house has shifted responsibility to congress. andays the action is cruel self-defeating. now let's look at bloomberg first word news or jessica: florida residents are preparing for the possible arrival of hurricane irma. miami-dade mayor says he may order evacuations tomorrow ahead of the storm. residents are applying plywood onto their homes to keep the storm out. the governor is bracing for the worst. >> i talked to the president last night. he promised me all the federal resources that we might need. i just got off the phone with the administrator of fema. he said the same thing. now category is
five storm and is set to hit rodrigo on wednesday and is on track to hit florida this weekend. white house press secretary sarah sanders says president trump ruffled his decision on the dreamer program all weekend. she called on congress to pass immigration reform, and that includes the dreamer issue. >> we have confidence that congress is going to step up and do their job. this needs to be fixed legislatively, and we have confidence they are going to do that. we stand ready and willing to work with him. jessica: there have been protests against the president's decision all over the country, including in front of the white house. scare for a japan airlines plane bound for new york after a reported bird strike just of the takeoff today. it was caught on camera. the plane turned around and made a safe emergency landing. crewassengers and 15 members were on board. global news 24 hours a day, powered by more than 2700 journalists and analysts in more
than 120 countries. i am jessica summers. this is bloomberg. julia: thank you so much. scarlet: thank you. summer is unofficially over. with it, the semblance of calm in financial markets. from the debt ceiling deadline to central big decisions, investors will be juggling headline risks against a backdrop of stable growth positions. invested two has plenty of cycles in his career as a money manager, now back of the firm he founded, xerion capital partners. he is here with us in new york. great to see you. dan: welcome to the new season. scarlet: talk about growth positions for the rest of 2017. the latest jobs report painted a somewhat weaker than expected snapshot of the labor market, even as an of women is fairly low. was not weaker than i expected. i think positions are ok.
we are not near 3% growth. we're done closer to 2%. scarlet: even though we did hit closer to 3% gdp? dan: you know, we hit 3% for now, but i think nobody expected to get 3% sustainably over the next several quarters. we're closer to 2%. unemployment is down. picked up a little bit last friday, but that does not tell the whole story. you know that the participation rate in the employment market is hovering still around 40-year lows, so wages are stagnant. we have talked about many times, in a disinflationary economic environment. the 10-year yield today is 2.8%. scarlet: with of the 10-year yield at that level and looking at equities and credit spreads, what is priced into the market? dan: this is not been
articulated a lot, but last quarter's earnings were really good, actually. you had over 70% upside surprises on revenue and 73% upside surprises on net income. versuss growth was 10.3% estimates going into the quarter of 6.4%. s&p is trading at 17 point five times forward earnings versus a 10-year average of 14.1 times thomas so we are a little bit high. why do i think it is potentially sustainable? scarlet: you are going to tell me something structural like technology. dan: specifically technology. we of talked about that before. the readthrough of all the capital and labor displacement technology is that it is really good when it is applied in traditional industries, because
you are taking out capital costs with software and services and taking out labor, which improves profit margins. so if you look get profitability across corporate, almost every sector experienced positive margin improvements in the last quarter of earnings, and i think that is reflective of a profit cycle that still has some ways to go. scarlet: so they have not peaked, margins? roomi think there is still for margin improvement, which i would not have said to bob years ago. this is about the concentration of technology, specifically ,oftware, services, and broadly, the internet. it is not only benefiting the the developers and purveyors of that kind of technology, but it is now beginning to benefit their customers. i think that is a very positive thing. it may not, in and of itself,
be sustainable forever, but i think there are potentially still some upside for a couple quarters more. scarlet: it has a disinflationary effect, as well. for by the way, it is good the consumer economy because the fact that things cost less means that people have more money to spend. scarlet: you say disinflation is inflation.ely than what does that mean in investing in fixed income versus private equity right now? the i think equity with longest horizon is probably where you want to be right now. patient public market exposure, which i have and am doing more of, and/or private investments. i do not know whether it is private fund investments or private investments without an
arbitrary term associated with of them. because as we go on to this process and as the penetration continues, it is going to take longer. it is going to be less obvious at every step of the way. so the money is going to be harder. this is analogous to the first 2009, easy in money. at the end of 2010, i was like the easy money has been made. it went on for a couple years, but we are now in the same place relative to the profit cycle from the penetration of iot technologies. scarlet: there is the debt ceiling showed on coming to us. steve mnuchin says september 29 is the critical timeline for congress. you have the relief of hurricane harvey possibly tied into the bill. donald trump is threatening to shut down the government if congress will not do some
funding for the wall. agree with a comment from "the wall street journal" last week that said hurricane harvey relief should be looked at fundeddently, should be for the people of texas without tying it up in politics. i think that is what will happen to it we will get a continuing resolution through september. the showdown will be in december. and there is a lot of nasty stuff to work through, including tax reform, which i do not expect much from, and a host of other issues. the next few months is going to determine whether anything gets done in congress before the midterm election season kicks off. scarlet: one final question on china. you have talked about china in the past. copper is surging because of optimism before china's party congress october 1. do you see this as a justifiable reason for copper to continue rallying? dan: i think there is a lot of a weak dollar component in the
commodity strength now. i am not as persuaded about the financials behind the strength. but i do believe that china will continue, were necessary, to ramp up fixed asset investment to sustain a respectable level of growth, even while believing that china is doing an excellent job of transitioning the economy toward consumption. scarlet: daniel arbess from xerion, thank you. still ahead, larry summers setting the record straight when it comes to tax reform. from new york , this is bloomberg. ♪
scarlet: this is "bloomberg markets." i am scarlet fu. julie: i am julia chatterley. tax reform on the agenda for the trump administration and congressional leaders as they get back to work today, despite a long list of other legislative issues here at former secretary of the treasury larry summers remindshe current plan him of what we saw in 1986. he is now a professor of economics at harvard. he explained further. >> tax reform, that is substantially simplified, the incentivesncreased for investment in equipment, i think that encouraged bringing largen a permanent way amounts of cash from abroad. that could have meaningful benefit for the economy. do not see the developing
in the proposals that are under discussion. i think there is a risk that some of the proposals, like the emphasis on territorial taxation without a global minimum, would operate primarily to encourage more businesses to do more things abroad, rather than in the united states. real tax reform would concentrate on the various practices, whether it is earnings stripping or a transfer pricing, that enable companies to avoid taxes by locating infits abroad and, particular, in tax havens. that is where we should become operating with our trading partners so that mobile companies cannot pit one country against another. when you are in a race to the bottom, the right thing to do is to try to change the rules. is to say weategy
are in a race to the bottom and then try to win. infer you think second-quarter gdp of 3% is not good enough are not sustainable? 3% is pretty good. >> sure, and everybody serious determines gdpcy with legs of six months to a ye ar 00 -- with lags of six months to a year. so nothing is yet a true biddable -- yet attributable anything that happened in the trump administration. i was careful throughout to say i was not predicting, as some who did not like the president's policies were, that we would go rapidly into recession this year. i do not think that gdp growth figure is any kind of referendum on the president's policies.
i think a lot of it has to do with catch-up from a very slow first quarter for a friday of technical reasons and that there is nothing in the data that is suggesting to any serious growth on at 3% sustained basis is in the cards over the next five to 10 years. going back to 1986 tax reform, corporate taxes were increased, but taxes on individuals were reduced. extent would it accomplish the growth objectives if we focused on personal taxation? think depending on what you did, there are things you could do with personal taxation that w ould encourage growth. right now we subsidize people going into financial engineering through the carried interest loophole. if we were to get rid of that
loophole, we would have more people thinking about how to make better products, how to make more productive workers, and fewer people thinking about how to leverage up companies. so there are things to be done on the personal side that would make the economy more efficient. julia: that was former treasury secretary larry summers. still ahead, options insight. the company ahead of earnings. from new york, this is bloomberg. ♪
seasonality. onwe have talked about, september 10, it could be rough for the stock markets in terms of volatility and in terms of returns. we have a chart of the vix versus it seasonal average to sort of look at the trends. this is the high, low, an average. the average is in white. you tend to see volatility start to climb in september. we have been at the lows here in volatility. what does this chart tell you? is it finally coming? >> one of the reasons i wanted to look at seasonality is because it has not worked in the past few years in the same way with volatility coming to the markets in september relative to previous months. if we want to think about september this year, it is starting off just like it has for the last couple of septembers. we go back to last year, vix is still relatively low and
subdued, especially compared with the five-year average, which is 15, as well as its historical average, which is 20. if you think about 2014 220 16, 2016 was a volatile year, but during september, it came down. vix hit the low in august. it could not calculate during august 24 when the chinese devalued the juan currency. but make came down the entire month of september. september has not been the volatile year people have expected, especially relative to what has happened that year. julie: so people should not get their hopes up. >> no, they should not. if you think the average last year of vix in september was below14, a 2014, it was that. we not volatile compared to that. julie: a move to your trade.
you are looking at kroger, which has gotten beaten up because of concern on amazon and whole foods but also on some food deflation. >> we have had food deflation. costs should be better later in the year for them. but one of the big issues will be cost pressures on them revitalizing stores and also reinvesting online. they have not launched that yet. and they are going against amazon. amazon acquired whole foods. they have that rich data and the prime numbers. so the problems they will have is competing against amazon, as well as walmart. they are the third-largest retail behind costco, as well as walmart. then the have european competitors coming into the market. there is no upside here. they report earnings on friday. 17.want to get to 22.5 by a 5 put spread.
you want to go out to january. this protects you through two earnings cycles. their guidance going forward could be even worse given headwinds coming in on the competition side and technology side. julie: we are out of time. thank you so much. , thank you. julia: still ahead, tech stocks of surged dramatically over the past year. to ruchir sharma of morgan stanley. this is bloomberg. ♪
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he said, to target hopeful young strivers who grew up to wrong, because they have done nothing wrong. british rime minister theresa may will try to force the pace of the brexit negotiations. the u.k. wants to move on to the issue of trade, while the eu wants to settle other issues first, such as how much the u.k. will pay as an exit fee. statements out of the trump administration's could be paving the way for a walk away from the iran nuclear deal. u.n. ambassador nikki haley says iran has violated the deal. president needs to certify ron compliance with the deal every three months. are reporting a major victory over the islamic state. they broke a three month siege in a town near the iraqi border. the